Auckland Council expects to face at least $25 million in extra costs from fuel and inflation rises, as part of an annual budget that keeps the rates rise at 7.9 percent but gambles on finding $85m later to make the numbers stack up.
Officials warn councillors, who meet on Wednesday afternoon and next week to digest the final draft of Mayor Wayne Brown’s budget, that the fuel and inflation impact largely affecting public transport, waste and parks contractors, could be as high as $50m in the year.
If the higher figure eventuates, Auckland’s public transport services could be reduced to save money, and the council and its local boards could yet have to cut what they fund for the public.
Brown does not want either the $25m or $50m possibilities to lead to an even higher rate rise. “I don’t believe this is the right thing to do given that Auckland households and businesses are struggling with the same issue. I do not want to increase rates further than is planned,” he says.
So, council officials propose finding ways to cover the lower figure and leave any higher fuel and inflation cost for actions later in the financial year, if needed.
“This approach limits wide-ranging operating budget and service-level impacts at this point in time.”
One measure recommended is to adjust the council’s books – recognising the council and Auckland Transport will underspend by as much as $500m on capital works as currently listed, and lowering that number to cut expected interest costs.
That could produce a $20m saving.
Brown wants elected councillors to also run their eyes over all planned Auckland Transport capital works valued at over $20m, looking for efficiencies.
If the higher fuel impact of $50m emerged, the mayor wanted “future advice [to] consider lowering service levels or removing low value, under-utilised public transport services to mitigate both cost and diesel usage”.
The council is likely to set an ambitious target for asset sales, despite already falling well behind targets because of the subdued property market and economic slowdown.
Brown wants staff to prioritise “a property sale pipeline retaining only the best-performing assets and quickly selling those not required for a clear council purpose” and “options to speed up disposals and streamline decision-making”.
But that might be optimistic. The budget projects total asset sale cash receipts of $67m in the financial year ahead, down about $112m on what was put out to the public as recently as February for consultation.
The mayor urges councillors to rule out borrowing money to pay for the added costs, or deferring a policy that would almost fully fund depreciation of council assets.
Brown argues this year’s 7.9 percent average residential rates increase is almost entirely down to the operating and depreciation costs of $235m for the new City Rail Link. (Using the metric reported by the Department of Internal Affairs and other councils nationwide, Auckland Council’s average rates rise is 8.54% not 7.9%, when business and rural rates are also included).
“I would have done things differently, but I can only look to fix the future and not the past.
“It would be irresponsible of us to kick the can down the road, only to become a future council’s problem.”
An officials’ paper on his final draft budget warns against more borrowing or delaying the council depreciation funding target.
“It should be noted that rating agencies are particularly focused on New Zealand public entities at this time, with our Moody’s rating currently on negative outlook.”
Options for shoring up the annual budget range from borrowing more, deferring the depreciation target, putting off capital spending, increasing an already steep operational savings target (currently at $106m for 2026/27), increasing public transport fares and/or cutting service levels and cutting council and local board services further.
In total, officials are trying to plug a $213m theoretical hole in the 2026/27 budget numbers. They say a total of $128m in mitigations have been found from savings and that capital programme timing change, leaving $85m.
“This leaves over $85m of financial pressure to manage throughout the year, which may be compounded by other budget risks discussed.
“While this represents a significant amount of risk to be managed throughout the year, this does allow the council to maintain the 7.9 percent rates increase.”
